Minister of Power, Adebayo Adelabu, has disclosed that the Federal Government is set to transition to a cost-reflective electricity tariff system to halt the rising debt burden in Nigeria’s power sector, which has hit ₦4 trillion as of December 2024.
Speaking during the Mission 300 Stakeholders’ Engagement in Abuja, Adelabu described the move as essential for making the sector financially viable and sustainable. He said the government is developing a plan that includes targeted subsidies to protect low-income Nigerians while removing blanket subsidies that are no longer sustainable.
“The Federal Government is working on a framework to defray existing debts and prevent new ones,” he said. “A cost-reflective regime, coupled with targeted subsidies, will ensure that we don’t continue to accrue debts.”
Tariff Disparities and Growing Liabilities
Despite the introduction of increased tariffs for Band A customers, consumers continue to complain about poor electricity supply, substandard infrastructure, and billing irregularities.
The cost-reflective tariffs — the actual cost of delivering electricity — significantly exceed the allowed tariffs customers currently pay. For instance, Band A non-MD customers have a cost-reflective tariff of ₦231.79/kWh, but only pay ₦209.50. For Band B and below, the disparity widens further, with some paying as little as ₦39.44/kWh despite actual delivery costs exceeding ₦200/kWh.
The government has already spent ₦1.1 trillion on electricity subsidies in the first half of 2025 alone, pushing total liabilities close to ₦5 trillion.
Calls for Sector Reform and Transparency
Adelabu outlined other reform priorities, including expanding transmission infrastructure, improving grid stability, boosting renewable energy via rural electrification, and strengthening coordination among stakeholders.
Minister of Finance, Wale Edun, also supported the move, citing a 40% increase in power distribution in Q1 2025 as a result of ongoing reforms.
Consumer and Expert Reactions
Stakeholders and consumer groups have reacted with concern. President of the Nigeria Consumer Protection Network, Kunle Olubiyo, argued that increasing tariffs without improving service quality amounts to exploitation.
“We’ve seen no real progress in generation or distribution,” he said, noting that only 400MW have been added to the grid since 2015. He warned that simultaneous economic pressures could politically damage the administration.
Bode Fadipe, CEO of Sage Consulting, added that sector liquidity, while important, is not the sole challenge. “We must go beyond pricing. Policy issues and infrastructural gaps must also be addressed.”
Consumers like Abubakar Aliyu, a Band C user, questioned any proposed tariff increase amid erratic supply. “We barely get six hours of power a day. How can they justify a higher tariff with such poor service?”
